It makes my day when I am asked a question I can’t answer completely and easily. The students in Columbia’s Information and Knowledge Strategy program rarely fail to disappoint in this regard.
Where do KPIs come from?
One IKNS student has been using the KVC framework in her “day job” to design program evaluations for a global NGO. Her question had several aspects: “Who designs Key Performance Indicators? Is that job, a profession, or what? How and where do you learn how to do it? How do you know it’s right?”
My first instinct was to answer from my personal experience. Shortly after I left college — in The Digital Dark Ages — I was tasked to design a set of performance metrics for day care agencies under contract with the State of New Jersey. I was officially a “Contract Administrator”, not a metrics designer. I didn’t know what I was doing — metrics design was just part of my job. I found a book on it, and somehow managed (like the one-eyed man in the Land of the Blind) to pull it off to everyone’s satisfaction.
The Balanced Scorecard industry
KPIs reached industrial strength with the development of the Balanced Scorecard in the early 1990s. People had begun to realize that financial performance metrics only took you so far — but typically these were the results of other events and activities that were operational in nature. Measuring those operational things (customer satisfaction, for example) was seen to have its own value. Metrics became a mini-industry — businesses were created to design and implement KPIs and (later) enterprise dashboards to monitor them.
In all this, there’s good news and bad news. The good news is that enterprise management has entered a new age of empiricism. Everyone wants to be evidence-based and metrics-driven, instead of gut-feel-and-instinct driven as previously.
The bad news is that in our quest for metrics, we are relying heavily on our ability to find the right metrics. Metrics do not grow on trees; they require resources (people, time, technologies) to develop and to implement. They themselves are investments, each having some (greater or lesser) ROI.